The Ultimate Oscillator was developed by Larry Williams and is a range bound indicator used to smooth out buy and sell signals given by moving averages. The oscillator can vary from o to 100 with the customary levels of 30 and 70 representing oversold and overbought readings. William's Ultimate Oscillator can also be very useful by looking for signs of divergence between current stock price trends and the trend present within the oscillator.
Ultimate Oscillator in Practice
In this example, as the stock price hit its last two highs during the uptrend you will notice that the Ultimate Oscillator was already in a downtrend. In this particular scenario the signal from Ultimate Oscillator led the eventual fall in the stock's price. In order to avoid exiting from a position too early it may be advisable to wait for the trend to break before acting on signals from the Ultimate Oscillator.
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